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Estonia saw a major boom from 2004 to 2007, as loan capital poured in from Scandinavian countries.

The country’s rise from Soviet occupation, beginning in 1991, had been miraculous, but the wave of investment was more than the market could usefully absorb. When the financial crisis came, it hit Estonia and its principal city of Tallinn very hard. Several thousand companies went bankrupt and layoffs, particularly of the low-skilled, rose into the tens of thousands.

Yet beneath the froth, Tallinn has put into place the foundations of ICT-based growth that is generating a strong comeback.

Tallinn’s first wave of IT industry growth was driven by national government spending on an amazing range of e-government applications. Its return to growth has a more sustainable basis in education and entrepreneurship. With 23 universities and technical schools, Tallinn has the resources for a knowledge workforce; it has focused now on expanding access and filling demand for ICT and digital content skills.

From 2007 to 2011, Tallinn Technical University doubled participation in lifelong learning programs. The city is expanding public access computer sites and training programs for the disconnected, while a public-private project called EstWin will extend 100 Mbps broadband throughout Estonia by 2015.

To support local startups and attract talent from beyond Estonia’s borders, Tallinn and its educational and business partners have launched multiple incubators targeting creative services, medical and biotech, mechatronics, and ICT. Europe’s first gaming accelerator opened in Tallinn this year, and its Ülemiste City industrial estate is expanding 50% to house 250 companies, making it the Baltics’ biggest knowledge-based development.

When the crisis struck, Tallinn moved fast to launch aid packages to get residents and companies through the bad times with their skills and ambitions intact. The value of the city’s short-term response and its long-term strategy will be proven in coming years.